DA's Dewey Probe Heats Up; 'Major Focus' Is on Statements Made to Lenders

The Manhattan District Attorney’s office is pursuing its investigation into the collapse of Dewey & LeBoeuf with subpoenas issued to the law firm and at least one of its lenders.

A “major focus” of the probe is whether Dewey leaders misled a bank syndicate that had issued a $100 million credit line to the firm, the Wall Street Journal (sub. req.) reports. The credit agreement had expired earlier this year and law firm leaders were seeking to extend it before the firm collapsed.

The Wall Street Journal report is based on information from unnamed people familiar with the investigation.

Prosecutors also want to know whether former partners were misled about payments made on loans they took to buy equity in the firm, the story says. The payments were supposed to be made to return the capital contributions when the partners left. Some ex-partners told the Wall Street Journal the firm maintained it was repaying principal, but in some cases only the interest was paid.

At issue is whether firm leaders violated state laws, including one barring false business records.

The story cautions that the investigation is still in an early phase and may not result in criminal charges. Barry Bohrer, a lawyer for former Dewey chairman Steven Davis, didn’t respond to the Wall Street Journal’s request for comment. But he has previously said that Davis had acted in good faith and in the best interests of the firm. And two people familiar with Dewey finances said they doubted there was any criminal behavior and lenders were always supplied with audited financial statements.